US embassy cable - 04HARARE1862

UNCLAS HARARE 001862 
 
SIPDIS 
 
STATE FOR AF/S 
USDOC FOR ROBERT TELCHIN 
TREASURY FOR OREN WYCHE-SHAW 
PASS USTR FLORIZELLE LISER 
STATE PASS USAID FOR MARJORIE COPSON 
 
SENSITIVE 
 
E. O. 12958: N/A 
TAGS: ECON, ETRD, EINV, PGOV, ZI 
SUBJECT: GOZ Steps Up Arrests of Forex Externalizers 
 
 
Sensitive but unclassified.  Not for Internet posting. 
 
1. (SBU) Summary: The GOZ has again been arresting 
prominent Zimbabwean businesspersons for sending foreign 
exchange offshore.  The GOZ appears to believe that these 
high profile arrests will deter others from exchanging 
forex on the ever-resilient parallel market.  End 
summary. 
 
2. (SBU) Over the past week, the GOZ has arrested at 
least eight leading businesspersons affiliated with 
mobile phone operators Econet and Telecel.  Among those 
detained: 
 
- James Makamba, who has already spent most of the year 
behind bars on similar charges.  The opposition press has 
asserted that Makamba's alleged extramarital liaison with 
First Lady Grace Mugabe is the underlying reason for his 
arrest. 
 
- Econet CEO Douglas Mboweni, an Embassy contact. 
 
- PG Industries COO Nyasha Zhou, who serves on the Econet 
Board of Director but does not oversee the firm's day-to- 
day operations.  Zhou participated in a U.S. Embassy- 
sponsored seminar about hyperinflationary coping tactics 
for businesses last year, and serves as Chairman of the 
Board of Zambuko Trust, a micro-finance institution and 
longstanding USAID partner. 
 
- Jane Mutasa, one of Zimbabwe's top businesswomen and a 
member of Telecel's board of directors. 
 
These new inmates join Finance Minister Chris Kuruneri in 
detention.  The GOZ has held Kuruneri since March and 
alleges that he externalized funds to build a beachfront 
Cape Town mansion.  This week, a local judge denied 
Kuruneri bail for the third time. 
 
3. (SBU) Reserve Bank Deputy Governor Charity Dhliwayo, 
who oversees exchange control, told us on Monday that the 
GOZ still considers the parallel market trading a threat 
to the economy and will pursue anyone who trades or sends 
abroad forex through these informal channels.  In his 
October 28 policy statement, Reserve Bank Governor Gideon 
Gono said he seeks to "ensure that regulatory provisions 
around parallel market dealing are tightened further." 
 
Comment 
------- 
4. (SBU) The GOZ's approach to monetary policy and 
disinflation is largely limited to exchange rate 
management.  To frighten people and firms from dealing on 
the parallel market, the Government has sporadically 
arrested high-profile businesspersons.  One senior banker 
commented that cracking down on businessmen and 
corruption is part of the GOZ's demagogic pandering to 
the masses to gain popularity in advance of the March 
elections.  The consensus of Zimbabwean businessmen from 
various sectors is that this tactic is resonating with 
large numbers of Zimbabweans.  At the same time, the 
GOZ's selective crackdown against "externalizers," which 
includes almost all businessmen, keeps the moneyed elite 
off balance and beholden to Mugabe and his favored inner 
circle.  In terms of economic impact, the GOZ's zealous 
enforcement has dampened but not eliminated parallel 
trading.  Local contacts tell us this week's buy/sell 
midpoint for U.S. dollars has been Z$8,700, a forty 
percent premium to the official Z$6,200 exchange rate. 
 
Weisenfeld